Wall Street Journal: Pelosi Pushes Two-Part Stimulus

By GREG HITT and JONATHAN WEISMAN

WASHINGTON — House Speaker Nancy Pelosi called for a two-stage effort to boost the shaky U.S. economy: a $60 billion-to-$100 billion stimulus package this month, followed early next year by a companion measure that would include a ‘permanent tax cut.’

In an interview Thursday, the California Democrat pointed to weakness in the nation’s job market, and urged the White House, long skeptical of Democratic-led stimulus efforts, to work with Congress in the waning days of President George W. Bush’s term. She said the U.S. can’t wait for President-elect Barack Obama to be sworn into office.

Rep. Pelosi’s call for aggressive action came as Mr. Obama scheduled a meeting Friday with members of his economic transition team. Taken together, the twin moves signaled that the flagging economy will receive immediate attention from a Democratic Party fresh off huge electoral wins Tuesday, but anxious about turmoil in the stock market, a shriveling job market and plunging home prices.

In the two days since Mr. Obama and congressional Democrats racked up big victories, the Dow Jones Industrial Average has fallen more than 900 points. New U.S. unemployment figures will be released Friday morning.

‘The economy needs something sooner’ than next year, Rep. Pelosi said, adding that any measure enacted in a lame-duck session of Congress this month would be a down payment on additional stimulus enacted later.

‘Let’s see if we can’t do something, working together now, that gives us a two-month jump,’ she said. ‘We’ll take the longer view as soon as we take over in January.’

In the long term, Rep. Pelosi said a capital-gains tax cut, as pushed by congressional Republicans, should be considered as part of a ‘tax simplification’ bill, not a stimulus package. Rep. Pelosi did stress, however, that the ‘second piece’ of the Democratic stimulus agenda should include a tax cut and would be part of a bill moved early next year.

Details have yet to be determined and will depend on further discussions with Mr. Obama. But the speaker prefers a tax cut over a tax rebate. The speaker said a tax cut would have a more immediate impact on the economy, especially if the government speeds dollars into worker paychecks by adjusting tax-withholding tables. ‘The impact is faster than a rebate, which takes a few months to get into people’s hands.’

Mr. Obama will meet with his top economic advisers in Chicago on Friday, including former Treasury Secretary Lawrence Summers, a top candidate for a second stint at Treasury, former Federal Reserve Chairman Paul Volcker, also a candidate, and Robert Rubin, another former Treasury secretary with an outside chance at a return engagement.

Also invited are other advisers who could play roles in the Obama economic team, such as billionaire investor Warren Buffett, Google Inc. Chief Executive Eric Schmidt and Roger W. Ferguson, a former Fed vice chairman who now heads the giant public-employees pension fund, TIAA-CREF.

Those advisers were all named Thursday to Mr. Obama’s 17-member transition economic-advisory board. Other members include Time Warner Inc. Chairman Richard Parsons and Xerox Corp. CEO Anne Mulcahy.

Obama economic aides said the emergency meeting — and the all-star cast — was meant to project urgency for a president-elect who knows the economy will be his most pressing issue. Bill Clinton waited until December 1992 for his economic summit in Little Rock, Ark. George W. Bush waited until January 2001.

Speaker Pelosi’s two-stage plan dovetails with planning within the Obama transition team. Even before Election Day, economic aides were saying Congress would likely take up a small economic-stimulus plan during a lame-duck session this month, but leave the bulk of the economic-recovery efforts for the first days of the Obama administration.

Mr. Obama and Democratic leaders foresee an initial burst of legislation that they believe will have broad bipartisan support, beginning with an economic plan, a previously vetoed measure to expand the State Children’s Health Insurance Program and another to fund stem-cell research.